Michael C. Fillios on SMBs and Future-Proofing with Tech Equity

Originally posted on Grit Daily
Written By Greg Grzesiak

Small- and medium-sized businesses (SMBs) were hit very hard by the pandemic and its fallout. And now, while no longer shut down by the pandemic, continuing challenges from the Russian War with Ukraine, inflation, rising interest rates, and unforeseen catastrophic events on the horizon require thoughtful and innovative solutions — particularly through investments in technology designed to future-ready their businesses.

Michael C. Fillios, founder and CEO of IT Ally, advises SMBs about the imperative of not just owning and maintaining technology but finding innovative ways to use it to create value and sustain the business into the future. He has authored two books, Tech Debt 2.0®: How to Future Proof Your Small Business and Improve Your Tech Bottom Line, and his new book, Tech Equity, How to Future Ready Your Small Business and Outperform Your Competition.

Grit Daily: Can you describe what you mean by the term “Tech Equity?” Share an example of how companies apply Tech Equity.

Michael Fillios: Tech Equity is considered an asset to an organization as it comprises the key capabilities of a company’s technology portfolio that drive differentiation and value creation. Take, for example, a small manufacturing business that replaces a repetitive manufacturing task with robotic automation. Of course, the monetary value of the robotic device itself may be considered a fixed asset in the company’s books. However, the value created by using robotic automation to improve a business process increases the business’s Tech Equity.

Grit Daily: Why is your focus primarily on small- and medium-sized businesses (SMBs)?

Michael Fillios: I focus primarily on SMBs because their success is vital for the success of the overall US economy. The innovations of SMBs propel economic resilience, allow us to compete more successfully overseas, and create opportunities for all of us to realize the American Dream. It’s important to me to provide SMBs with sound, reliable advice about their technology investments because SMBs typically have smaller budgets and fewer in-house technology resources than larger companies.

Grit Daily: What shift do SMBs need to make in their technology investment strategy?

Michael Fillios: Prior to the COVID-19 pandemic, technology spending for SMBs was often for maintenance purposes — for example, to update aging infrastructure or patch security vulnerabilities. This was a defensive approach. However, in the early months of the COVID-19 pandemic, some SMBs took a more aggressive approach toward technology investment. They were thinking innovatively and investing in long-term solutions like collaboration or CRM (Customer Relationship Management) software. As a result, they gained advantages over those who were slower to react.

SMBs need to switch to this approach as a long-term strategy and go on offense to create Tech Equity. SMBs that create Tech Equity are better positioned to navigate crises, take advantage of opportunities, and outperform the competition.

Grit Daily: What sort of investment is necessary for building Tech Equity?

Michael Fillios: Creating Tech Equity requires a balanced, long-term investment strategy and a commitment to making those investments in an ongoing, repeatable fashion. This requires a culture change whereby the business owner(s) and leadership recognize that technology will enable their future value creation long beyond a short-term investment cycle.

Grit Daily: What do you advise regarding investing in technology that adds value versus technology that manages risk?

Michael Fillios: Tech Equity is divided into two categories — Alpha and Beta. The Alpha Tech Equity components are those that create the most value because they raise an SMB’s valuation and enable SMBs to outperform their competition.

Consider the robotic automation example I mentioned earlier. Implementing robotic automation increases one of the Alpha components, “Process Excellence,” because a repeating business process becomes more efficient and reliable by implementing automation.

To begin creating Tech Equity and obtain demonstrable results quickly, the Alphas are a great place to start. This isn’t to minimize the importance of the Beta Tech Equity components, as they’re critical for mitigating risk in an SMB. An example of this is “Tech Debt 2.0® Management.” If a business neglects to keep software up to date, it’s more prone to the risk of costly outages or security breaches.

So, while the Alphas provide the greatest return on investment, there needs to be a balance so that both the Alphas and Betas are considered in technology investment strategy.

Grit Daily: How can SMBs best ensure that they’re implementing and utilizing technology to future-ready their business?

Michael Fillios: SMBs should routinely perform a self-assessment to measure their Tech Equity. Recognizing the importance of providing a Tech Equity metric, the IT Ally Institute created the Tech Equity Diagnostic as an online tool to assess an organization’s Tech Equity. The diagnostic is a set of 53 questions divided amongst the Alpha and Beta Tech Equity components. When an organization completes the diagnostic, they’re presented with a numeric Tech Equity score along with a text description based on what range the score falls into. This allows organizations to assess where they are and over time, track their progress as they create more Tech Equity to become future-ready.